McDowell Holding has a market capitalisation less than Rs 50 crore but its value of investments is nearly Rs 800 crore, reports CNBC-TV18‘s Varinder Bansal.
There are companies that seem a bit undervalued only on the basis of the numbers. McDowell Holding is one such company. It has a market capitalisation of Rs 50 crore, but its value of investment is nearly Rs 800 crore.If you see the value of investments on the face of it, it is nearly 16 times the market capitalisation.
Clearly most people in the market will tell you that you have to take a holding company discount or even if you go for 40-60-70 percent, even after shaving of 70 percent because of the holding company discount, the company will still be available for nearly 4 times the value of the market cap the company is having.
The investments that this company holds: clearly in United Breweries, where we have been hearing a lot about Heineken hiking its stake, the company holds nearly 1.07 crore shares at the current market price, the value of that alone is over Rs 800 crore. You have Mangalore Chemicals where the company holds nearly 358 lakh shares, the value of that is nearly Rs 35 crore.The debt of the company, which is nearly Rs 80 crore (even if we shave off that), the company’s investment value will be nearly Rs 750 crore.
We went a step ahead and also thought of just taking the unpledged shares or clean shares of the company which means that the promoter pledge is not on those shares. Even if you take out all the pledged holdings of the group, you will see that they are still nearly 34 lakh shares of United Breweries which this company is holding and the value of that is nearly Rs 255 crore, which is still nearly 5 times the value of the market cap.The important point here is the shareholding. The promoter holding is nearly 30 percent and the pledge is nearly 45 percent.
However, the one important thing that we have found out is that if we just see the last one year, the promoter holding has been consistently coming down and the institution or other non-institution promoter holding has been going higher.The promoter holding, which is going down from 43.5 percent to 37-30 percent, is only because most of the pledged shares have been taken up by the lenders and have been sold in the open market. This is clearly putting the pressure on the stock that is where the promoter holding has been going down.
There are three big names which are there in the non-institutional category which are there in this company, ACACIA Partners – US-based FII, Route One Fund (FII) and SBI Emerging Business Fund. All of them collectively hold nearly 30 percent stake in the company, nearly 10 percent each. There are talks in the company that if you could even see that pledged holding of that 45 percent getting with these three biggest non-institutional players and if this happens, you could even see that the non-institutional or the non-promoter holding in this company could be higher than the promoter holding going ahead because of the way it is going down but clearly even after doing anything and everything deducting the debt, deducting the pledged holding, the company still is available for nearly four times the market capitalisation of the company.
Mallya Holding Company Discount
There are few people in the market who have been buying stake or buying shares in this company at a low level. Clearly, if you see some of these three institutions which I have mentioned ACACIA, Route One Fund and SBI, they hold 30 percent stake in the company, which is equivalent to the promoter holding.
Of course, even going by Mallya discount or going by holding company discount, a Rs 50-crore company which has assets worth Rs 800 crore and with institutions maybe they will go ahead and buy more because there is still pledge of nearly 45 percent of the 30 percent.
So if that 15 percent comes to these non-promoters, you could even see, as said earlier, that the non-promoter holding could go much higher than the promoter holding and eventually one day it could even happen that this company would go away from the Mallya hand thus there could be no Mallya discount prevailing in the future.